‘Very Poor Practice’ in Preservation Offset by the Defendant’s Choice Not to Review

In this long-running contract case, the defendant, Cuker Interactive, requested sanctions against the plaintiff, Wal-Mart Stores (“Walmart”), for allegedly failing to preserve relevant electronically stored information (ESI). But, despite finding that the plaintiff deleted relevant information from a former employee’s computer, the court denied the motion because the defendant did not review the information that was available.

Walmart admitted that it deleted ESI from the laptop of its former employee, Tal Herman, after his employment ended. Walmart claimed that “it simply wiped Mr. Herman’s laptop pursuant to its standard unwritten policy.” Cuker alleged that this deletion occurred “one month after [Walmart] began preparations for this lawsuit,” when it had a duty to preserve relevant information.

Herman, who had been the Worldwide Director of User Experience for Walmart, “was responsible for the ASDA and Walmart2Go websites that are at the heart of the claims in this case.” In that role, Herman had met three times with Cuker about their project. Cuker asked the court for dismissal of Walmart’s claims or, in the alternative, an adverse spoliation instruction under Federal Rule of Civil Procedure 37(e).

The court noted that while the question of “[w]hether to impose discovery sanctions is a decision committed to this Court’s discretion, [] the scope of that discretion narrows as the severity of the sanction increases.” Specifically, after the 2015 amendments to Rule 37(e), courts in the Eighth Circuit must make both of two distinct findings to issue an adverse inference jury instruction: “(1) there must be a finding of intentional destruction indicating a desire to suppress the truth, and (2) there must be a finding of prejudice to the opposing party.”

Here, the court found that Cuker had “not demonstrated prejudice” and therefore denied the motion without considering whether Walmart had intentionally destroyed ESI. In finding a lack of prejudice, the court pointed out the “fact that Cuker declined the opportunity during discovery to review, at its own expense, backup tapes of Mr. Herman’s emails.”

In response, Cuker argued that Walmart had deleted more than just emails, and that “the backup tapes were unlikely to reveal much useful material.” The court, however, was “unwilling to base a finding of prejudice here on speculation about the content of material that is not in the record, when at least some of that absent material was discoverable and available to the party seeking the sanction, who nevertheless chose not to review it.”

However, Walmart did not escape the court’s scorn. In response to the motion for sanctions, the court first noted that Rule 37(a)(5)(B) did not apply “to denials of motions seeking sanctions for spoliation.” Beyond that, though, the court observed that the record supported “a very reasonable inference that at the time Mr. Herman’s laptop was wiped, Walmart was aware that litigation was looming and that Mr. Herman had interacted directly with Cuker on the project giving rise to this litigation.” As such, “it was very poor practice for a company as sophisticated as Walmart to have wiped Mr. Herman’s laptop.” Therefore, “whether this was the result of bad intent or a simple oversight, the Court will not reward Walmart” for its conduct.

Case law takeaways

There are lessons on both sides of the court in this case. Obviously, information that is potentially relevant should not be deleted, even pursuant to standard policies, when litigation is likely. But just as importantly, when a party has an opportunity to review relevant information, however limited, during e-discovery, then they must seize it. The court will likely not be sympathetic when parties have failed to seek available discoverable information.

Ironically, if Cuker had borne the initial cost of reviewing information, it would likely have won its motion for sanctions and recovered the associated costs. This situation echoes the warning of former U.S. District Judge Shira Scheindlin in Sekisui American Corp. v. Hart: “imposing sanctions only where evidence is destroyed willfully or in bad faith creates perverse incentives and encourages sloppy behavior.”